Bernie Sanders defies White House and blasts Puerto Rico debt plan

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Breaking from President Barack Obama and the White House, Senator Bernie Sanders is blasting a putative deal to install an oversight board to return order to Puerto Rico’s ruinous finances saying it would make things worse not better for the island’s residents.

The salvo fired by Mr Sanders threatens significantly to complicate the path ahead for an accord hammered out just last week by the Republican and Democrat leaderships in the House of Representatives with explicit White House support.

In a letter to colleagues in the US Senate, Mr Sanders urges them to reject the plan when it comes to their chamber for a vote, saying it would make a “terrible situation even worse”. He made the intervention with at least one eye on his battle for the Democratic nomination - one of the very last Democrat primaries will be held on the island in two weeks on 5 June.

As it stands now, the proposal would give extensive powers to the new authority to introduce severe social spending cuts and restructure the island’s $70 in debt. Puerto Rico has already defaulted on almost $1bn in debt payments and is set to miss a bigger $2bn payment on 1 July.

The tropical and essentially bankrupt isle, which as a territory of the US is neither an actual state nor a sovereign country in its own right - islanders have US passports, however, and can vote for presidents - is also struggling with a roughly $40bn shortfall in state pension obligations.

While the government of Puerto Rico in San Juan had been begging Congress to do something to help it deal with the default crisis, it did not favour establishing an oversight board with such wide discretion essentially to run rough-shod over the island’s own elected representatives.

That is at the heart of the Mr Sanders’ objections. The Senator claims, for instance, that the new “unelected and undemocratic oversight board” would give the Governor leeway to slash the minimum wage to a paltry $4.25 an hour for as long as five years.

"We must stop treating Puerto Rico like a colony and start treating the American citizens of Puerto Rico with the respect and dignity that they deserve," he wrote to Senate colleagues.

Puerto Rico is in a ten-year slump that has spurred an accelerating exodus to the US mainland. For the population of about 3.5 million left behind, the crisis has seen rapidly deteriorating services, including shuttering of schools and hospitals, and rising taxes.

With more than 67 delegates up for grabs in the 5 June primary, both the Hillary Clinton campaign and Mr Sanders have been vigorously courting its voters. Former President Bill Clinton also spent part of last week hopscotching between its biggest cities.

On his own swing through the island last week, Mr Sanders said it was time to end the twilight status of the island. He urged the holding of a new referendum giving islanders a chance to choose between remaining with the status quo, becoming the 51st state of the US or cutting the cord and becoming a sovereign nation.

"It is time for the people of Puerto Rico to be allowed to take charge of their political future and for the United States of America to redefine its legal relationship with the people of this Island," Sanders said at one rally in San Juan. "The people of Puerto Rico should not and cannot provide colonial like treatment of its citizens, the people of the United States cannot continue colonial-like relationship with the people of Puerto Rico.”

Mr Sanders, who has vowed to keep battling Ms Clinton all the way to the Democratic Convention even though he has virtually no chance to stop her becoming the party’s nominee, has also gone further than her or anyone else arguing that the only short-term solution for Puerto Rico is a federal reserve bail-out, a step that would be anathema to Republicans.

“If the Federal Reserve could bail out Wall Street, it can help the 3.5 million American citizens in Puerto Rico improve its economy and lift its children out of poverty,” he said. “Under current law, the Federal Reserve has the authority.”